TRADE-INDUCED SKILL POLARIZATION |
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| Authors: | Grace W Gu Samreen Malik Dario Pozzoli Vera Rocha |
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| Institution: | 1. Department of Economics, University of California, Santa Cruz, CA, 95064;2. Department of Economics, New York University (AD), Abu Dhabi, United Arab Emirates;3. Department of Economics, Copenhagen Business School, Frederiksberg, 2000 Denmark;4. Department of Strategy and Innovation, Copenhagen Business, Frederiksberg, DK, 2000 Denmark |
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| Abstract: | We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage-gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills. |
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